Actuary Mark Johnson recommended to the OPERS board that
rates for state agencies be boosted from 10% of payroll to
17.6% of payroll effective July 1, 2003, according to a
report by Washington-based legal publisher BNA.

He recommended that school districts increase their
pension contributions by 42%, from 13% of payroll to 18.6%
of payroll. And he recommended that the judiciary system
increase its pension contributions by 70% from 11.5% of
payroll to 19.7 % of payroll.

The PERS board is scheduled to take action on the
recommended employer rates January 14.

Bear Market Damage

The culprit as is the case with numerous other pension
programs: PERS has been rocked by the often-anemic returns
of a bear market.

The regular PERS account sustained its largest loss
ever, 6.7%, in 2001. The year before it barely broke
even.

Under current Oregon law, PERS members are guaranteed an
8% return regardless of the market conditions. Over the
past few years the PERS reserve account for dealing with
market swings has been depleted, so it has been up to
employers to make up the difference.

The rate increases were expected, and public employers
across the state are concerned about the financial impact
of the added cost.

The pension rate increases will impact school districts
and state agencies that have already had their budgets
reduced by lagging tax revenues. The new higher rates will
cost school districts an extra $120 million annually, said
Jim Green, senior legislative advocate with the Oregon
School Boards Association, according to the BNA report.

PERS Controversy

The increase is also expected to fuel a growing demand
for PERS reform this coming legislative session, BNA said.
The system has been criticized for being overly generous to
public employees and too costly for taxpayers.

PERS has generated its share of controversy in recent
months:

In a lawsuit filed by several local governments
over PERS employer rates, an Oregon state judge blasted
the fund for its “improper management.”
Circuit Judge Paul Lipscomb ordered PERS to recalculate
how stock market profits from 1999 were divided up so
more goes into contingency reserves instead of into
pension accounts. (See
Judge Blasts Oregon Pension Panel
).

In August, the PERS board agreed to scrap its
25-year-old life expectancy tables. Use of the
out-of-date tables cost the fund $135 million and
tacked another $1.5 billion to the PERS shortfall,
officials said. (See
Have Oregon PERS Tables “Out-Lived” Their
Usefulness?
).

PERS represents nearly all nonfederal public employees
in Oregon. It has $36 billion in assets and provides
retirement benefits to 81,000 members or beneficiaries.